A quarter of traditional Irish financial services firms fear they will lose more than a fifth of their business to fintech start-ups, according to a new report from accountancy and consulting firm PwC.
Four in five believe at least part of their business is at risk.
The PwC report found, in particular, that there was a lack of understanding about blockchain technology, with 86 per cent of Irish firms “at best moderately familiar” with the emerging technology. This may cause them to underestimate its potential impact, it warned.
"In our view, the lack of understanding of blockchain technology and its potential for disruption poses significant risks to existing business models," said PwC Ireland's John Murphy, who leads its fintech team.
Blockchain allows firms to structure data, such as bank transactions, in new, innovative ways. The technology – which underpins the digital currency, Bitcoin – can speed up payments and transfer clearances, settlements and reconciliations.
PwC’s Global Blockchain team has identified more than 700 companies entering this space, and picked out 150 that it believes are “ones to watch”.
“Cutting-edge fintech companies and new market activities are redrawing the competitive landscape, blurring the lines that define players in the financial services sector,” the report states.
Funding of start-ups in the global fintech sector more than doubled in 2015, reaching $12.2 billion, up from $5.6 billion, according to PwC. Investment in fintech is estimated to exceed $150 billion within the next three to five years.
“Financial institutions and tech companies are vying with one another for a chance to get part of the action,” said Mr Murphy.
‘Traditional finance’
“As the lines between traditional finance, technology firms and telecom companies are blurring, many innovative solutions are emerging and there is clearly no straightforward solution to navigate this fintech world.”
The report highlights an environment where "traditional loyalty to financial institutions is being diminished and barriers to entry from third parties are lowered" in areas such as payments, where the "fluid" competitive landscape has seen the arrival of services like Apple Pay, Venmo and Dwolla. The report is based on the responses of 544 business executives across the financial services industry in 46 countries, including Ireland.
